In an exclusive interview with Teles Properties President Sharran Shrivatsaa the top economist from the California Association of Realtors shared what she thinks about the state of the real estate market. According to CAR Chief Economist, Leslie Appleton Young, the good news is that the overall the market is in good shape. Prices are building a strong base as buyers, with equity, are challenged to find supply to meet their demand. However, it is important to note that on the high end, over $2m in our South Bay and PV market, prices are plateauing and supplies are more plentiful.
The total interview is over an hour, so I have highlighted some of the key takeaways from the interview below….
Q – What are your top of mind trends?
LAY – Interest Rates. The fed is following the market at this point. We are going to see somewhat higher rates this year . . . just enough to create some urgency . . . but there’s a lot of uncertainty.
Q – How’s the market?
LAY – It’s very competitive. Over half the sales in California have multiple offers, but it’s toned down a little from 2013 because the prices are higher. There is strength in the market – healthy demand, strong economy in California. The high end has plateaued and buyers don’t want to overpay.
Q – Why wait to buy?
LAY – Californians are moving every 18 years instead of every 7 years. If you are waiting for a big boom of supply to come on the market, it’s not going to happen. 71% of Californians over the age of 55 haven’t moved since 1999. Baby boomers want to stay in the game, and more parents are leaving their home to their kids. We have a very sluggish turnover.
Q – What do you think about pocket listings?
LAY – I don’t get it? It’s unambiguous, the data shows that if a property is on the MLS, you are going to sell the property for more. I don’t get pockets – I don’t like them.
Q – What’s happening with trending rents?
It’s huge problem. Rents are so high so buying makes sense, but buyers can’t save for a down payment when they’re paying so much in rents. In more affordable markets, the FHA is helping buyers qualify with less down.
Q – Are we in a Bubble?
LAY – No, I don’t see the tell tale signs. There is an overabundance of capital searching for yield in a low rate environment which is why the stock market and housing looks the way it does. There is job growth, wage growth, high end wealth growth. We don’t have a lending issue, but there is a noticeable increase in cash out refis. When ever anything happens bad in the rest of the world, money flows into the US. The market is subdued given the rest of the economic factors.
Q – Will Trump’s Tax Plan have an effect on the market?
The tax plan is a one page with bullet points, so that’s all we know. But we know a couple things. The lobby for real estate is really strong, so they are keeping mortgage interest deductions. Not being able to deduct property taxes and state and local taxes could hit California disproportionately. If this happens, there could be a pushback on price declines. CAR will fight this to have a tax system that says housing is really important.
To hear the entire interview, listen on the Soundcloud link below.
